State of Emergency: Health and Beauty Counterfeiting and Diversion

There used to be a time when one could discern a fake cosmetic product from an authentic one by just examining the package. Certain external characteristics—or flaws—like a misspelled word or a flimsy material would give it away. Now, printing and imaging technology has evolved and become so inexpensive that counterfeiters can easily obtain it to create packaging that fools even the savviest consumer. Third-party sellers online like Amazon, Jet.com and other smaller e-retailers have made it near impossible to discern between those selling legitimate and counterfeit goods.

The bottom line is that if you have a popular brand, the gray market will notice, and will try to take advantage of your hard earned success.

Health and beauty products are developed to help individuals. Manufacturers go through rigorous development and testing before releasing their products to market. There are also numerous governmental quality regulations that manufacturers must follow. Counterfeiters and diverters of successful branded products have little regard for consumer safety or governmental oversight.

The Dangers of Counterfeiting

This past February, London detectives seized over $50,000 worth of counterfeit items at a fake perfume manufacturing factory. These items—with price points well below the authentic—have been repeatedly found to contain high levels of lead, arsenic and mercury. It goes without saying that applying any of these chemicals can result in allergic reactions ranging from rashes to severe burns.

This can have a direct impact on brand loyalty. Even if a consumer purchases a fake beauty product and is instructed on where to find authentic version afterwards, your business runs the risk of losing that customer forever due to one bad experience. Health and beauty consumers are extremely loyal to the brands they trust so it’s more important than ever to keep their trust in today’s counterfeit culture.

Diversion and counterfeiting go hand in hand. Even if an authentic product is diverted from the intended supply chain and sold on an unauthorized channel, you can guarantee that the product wasn’t handled with care, and that it’s been tainted or diluted in some way. In fact, it’s not uncommon for well known retailers like Sally Beauty, Target and CVS to sell products sourced through unauthorized channels. The issue is that it’s not necessarily illegal for these retailers to procure products this way, but the effects to revenue and consumer safety make it more than worrisome. Diverted health and beauty products can be tampered with, mishandled and even be sold after expiry once they exit the legitimate supply chain.

What You Can Do

Counterfeit and diverted health and beauty products impact revenue, introduce consumer safety risk and threaten brand loyalty. Current anti-counterfeiting techniques in health and beauty typically involve additive elements to product packaging like special seals and marks. The ever-expanding gray market has shown us that these types of tactics are inefficient at keeping bad actors at bay. Some manufacturers are beginning to realize this and have begun to get ahead of the issue by implementing a covert anti-diversion program that ensures their products get to the intended destination without any hiccups along the way. This is an opportune time for solution providers to introduce new technologies that leverage the core benefits of mobile consumer engagement.

The only way manufacturers can trust that their consumers, brand and revenue are safe is by leveraging a solution that requires nothing extra. A non-additive solution that can’t be duplicated, but can be authenticated at every step along the supply chain, all the way through to the consumer.

Ready to learn more? Click here and if you’re heading to LuxePack NYC next month, stop by booth D32 for an in-depth discussion with our brand protection experts.